By Colin Foster
Tories are saying that pay-outs to top bosses should be curbed, and New Labour is saying no such action is necessary. That's a measure of where Blair and Brown have taken the Labour Party.
On 25 April the fund management group Foreign and Colonial called for insurance firms to require companies to make directors pay back bonuses if company's profit performance subsequently turns out to have been poor.
Two years ago, the then leading Tory MP Archie Norman tried to get legislation in Parliament to stop pay-outs to company bosses who failed to bring in profits. The Government decided to ask for research, and then, in January this year, said that "current rules are working" and it would not legislate.
Since then Rover has collapsed. Its four top bosses, who bought it for £10, had paid themselves tens of millions of pounds out of the company as it headed towards collapse.
Peter Davis took £2 million in bonuses out of Sainsbury just before the company slumped into the red. Luc Vandevelde, Roger Holmes, and Vittorio Radice took more than £8 million out of Marks and Spencer as its sales dwindled.
Six directors of the Jarvis group pocketed £807,000 in bonuses as its share price was wiped out. Former Shell boss Phil Watts was handed £1 million when he resigned in March 2004, although his bonuses had been based on claims of increased oil reserves that were plain untrue.
Archie Norman, and the fund managers at Foreign and Colonial, have no objection to top bosses pocketing huge wealth. Their objection is that the wrong (incompetent) bosses are pocketing the loot, leaving less for the right ones (including, they think, themselves).
But who judges the bosses' competence? Themselves and their friends. No wonder they reckon they deserve huge bonuses.
A detailed report on bosses' pay in Britain's ten biggest companies, published on 18 April, found that their total pay had increased by 7% in 2004 - much more than almost all workers' pay, of course - but that was a sharp drop on an average rise of 27% per year for the previous five years.
The bosses received more in bonuses than they did on salary, and, despite all the Government's stories of how pension cuts are necessary with an ageing population, pension pay-outs also exceeded salary. In 2004, the average transfer value of that single year's increase in the bosses' accrued pension entitlements was equivalent to 118% of their salaries.
The socialist answer, in short, is that workers should control the industries they work in, and monitor managers' competence. Managers should be elected by the workforce and paid an ordinary skilled worker's wage.